Basics of Cost and

Schedule Monitoring
Nathaniel Osgood
4/5/2004
 Announcements
„ Tuesday field trip
„ Leave at 4pm
„ At existing platform 4:15pm

„ Problem set grading: ps1 ongoing, ps2 end of

this week
„ TP3 out today
„ Questions on problem set?
 Topics
„ Monitoring and Scheduling: The Big Picture
„ Monitoring
„ Links to previous topics
„ Key components in realizing effective monitoring
„ Measurement: Basics of cost and schedule tracking
„ Components of Measurability
„ Collecting information

„ Performance Metrics
„ Forecasting
„ Quality monitoring
 Monitoring and Control:
Two Parts of a Feedback System
„ Goal is to detect and correct deviation from desired
„ Budget
„ Schedule

„ Quality

„ Detection: Monitoring
„ Correction: Control
„ Much harder than monitoring!
„ Bring project performance back in line with plans

„ Typical: Bring plans in line with performance

Growing Expenditures, Declining
Control
 Definitions
Monitoring: Project Monitoring is the set of
procedures and management practices
used to collect information about the
performance achieved or forecasted in
a project and the developing
organization, based on a set of
performance metrics.
Performance Analysis: The process of determining
performance variances based on
monitored or forecasted performance.
 Definitions
Project Control: The purpose of project control is to adjust the
project to meet its goals by assessing the
performance of the project, analyzing the causes
of performance problems, designing changes to
address problems that are determined to need
attentions, and implementing those changes
through control actions. Project control is
distinguished from project planning in two
important ways: 1) project control yields a set of
designs, decisions, and actions, whereas project
planning yields a design, and 2) project control
is a real time process during the implementation,
not before the implementation begins.
 Critical Role of a Feedback System
„ Totally static planning is a (useful!) fiction
„ Many factors make deviations standard e.g.
„ Physical: Weather, diff. geotechnical conditions,…
„ Early or late delivery of procured items
„ Changes in owner needs
„ Differences in productivity
„ Community opposition/Concerns abutting buildings
„ Mistakes in planning

„ Even within slack, have resource constraints

„ Morale often dependent on good planning
Perceived Challenges for Effective
Monitoring & Control
Rank
Order Challenge Frequency
1 Coping with end-date-driven schedules 85%
2 Coping with resource limitations 83%
3 Communicating effectively among task groups 80%
4 Gaining commitment from team members 74%
5 Establishing measurable milestones 70%
6 Coping with changes 60%
7 Working out project plan agreement with team 57%
8 Gaining commitment from management 45%
9 Dealing with conflict 42%
10 Managing vendors and subcontractors 38%
11 Other challenges 35%
Problems Ranked by General and
Engineering Managers
 Topics
9 Monitoring and Scheduling: The Big Picture
„ Monitoring
„ Links to previous topics
„ Key components in realizing effective monitoring
„ Measurement: Basics of cost and schedule tracking
„ Components of Measurability
„ Collecting information

„ Performance Metrics
„ Forecasting
„ Quality monitoring
Links to Earlier Topics: Scheduling
„ Scheduling provides us with a yardstick to help
us understand what to expect over time
„ Work Progress
„ Expenditures

„ Without some scheduling, we would have nothing

against which to compare progress!
„ Monitoring Ÿ Scheduling: Must reformulate
schedule to reflect discrepancies!
 Schedule Updates from Monitoring
„ New estimates for activity
„ Costs
„ Durations

„ Resource availability

„ Must compute new critical path

„ May lead to changed monitoring priorities
„ NB: A schedule that does not get updated to
reflect in-field conditions is
„ Unlikely to be used
„ Dangerous if used
Project Plan is the Foundation of
Effective Monitoring

„ Plan Ahead
„ Involve Project Team Members during the
Planning
„ Define Specific Task Responsibility
„ Obtain Commitment
„ Assure Measurability
 Tie-Ins with Earlier Topics:
Estimation
„ Cost Estimation helps us understand cost
implications of activities
„ Often this is folded into the schedule
„ Without estimation, we also would have nothing
against which to compare progress!
„ Often used to prepare initial budget
„ Problems
„ Different level of granularity

„ Estimate oriented towards outside reporting

 Topics
9 Monitoring and Scheduling: The Big Picture
„ Monitoring
9 Links to previous topics
„ Key components in realizing effective monitoring
„ Measurement: Basics of cost and schedule tracking
„ Components of Measurability
„ Collecting information

„ Performance Metrics
„ Forecasting
„ Quality monitoring
Components of Effective Monitoring
„ Representative Performance Metrics (established at planning
phase)
„ Cost & Schedule Milestones should be well-defined and
clearly approved/rejected.
„ Reporting Schedule (perhaps of variable ƅt ’s)
„ Financial importance of activity
„ Activity criticality
„ Rate of work
„ Difficulty of work
„ Management Scheme organized for honestly and accurately
identifying and reporting performance
„ Involvement of responsible and knowledgeable people in the
reporting scheme
„ Project Reviews (walkthrough’s & inspections)
„ Project Audits
Characteristics of Effective Control
System
 Topics
9 Monitoring and Scheduling: The Big Picture
„ Monitoring
9 Links to previous topics
9 Key components in realizing effective monitoring
„ Measurement: Basics of cost and schedule tracking
„ Components of Measurability
„ Collecting information

„ Performance Metrics
„ Forecasting
„ Quality monitoring
Measurement of Project Progress
„ Traditional measures of project “progress” are
based on resources consumed
„ Time spent
„ Money spent

„ What is the problem with this?

 Effective Measurement
„ Most effective progress measurements are
carried out not on project inputs ($, labor, time,
etc.) but on project outputs
„ Goal: Measure progress towards completion
„ Inputs are easy to measure; how do we measure
outputs?
„ Where possible, divide activities into stages
„ Define clear-cut milestones

„ Keep track of costs, labor, time on per-activity basis

 Characteristics of Well Defined
Milestone
„ Clearly Defined Entity
„ Verifiable Parameters for Each Delivery Item
„ Clear Relationship to Program Management
Plan
„ Well Defined Responsible Organization or
Individual
Steps for Establishing Measurable
Milestones
Measuring Progress w/i Activity
„ Units completed (units task specific)
„ ft Rebar laid, # columns placed, yd3 earth moved,
panels mounted, ft2 drywall placed, ft piping installed
„ Incremental sub-task milestones
„ Each associated with agreed-upon fraction of work
„ May be weighted if going on simultaneously

„ Supervisor subjective opinion

„ Binary start-finish
„ Input measure: $ incurred/estimated total $
 Key Component: Linking Activities
and Count Accounts
„ Recording granularity critical – limits what can be
understood with the data
„ Many-to-many mapping between
„ Cost categories
„ Activities

„ Traditional operational accounting would just

have cost code with type of item being charged
„ Ways of addressing
„ More detailed cost code (incorporating activity)
„ Apportioning of ambiguous costs according to non-
ambiguous
 Tradeoffs in Cost Granularity
„ More detailed advantages
„ Preserves option of finer investigation
„ Can allow for quicker
„ Response to deviations

„ Determination if control strategies helping

„ Less detailed advantages

„ Less work for staff
„ Faster recording

„ Lower likelihood of error/compliance failure

 Means of Collecting Data
„ Foremen note progress on timesheets
„ (Implicit): Team
„ Cost category for item

„ Square footage for progress estimate (if lucky…)

„ Payroll clerk enters timesheets in office

„ Additional managerial attention can be applied
for important activities
 Review: Cost Breakdown Structure
„ Canonical way of accounting for costs in the
project
„ Assigns accounts for different types of
expenditures
„ Should permits tracking expenditure by activity
(work item)
„ Often includes WBS-based characterization (e.g.
CSI Masterformat)
Managerial vs. Financial Accounting
„ Managerial (“Cost”) Accounting
„ Reporting to managers for strategic planning
„ Operational use

„ Financial accounting
„ Typically for outside parties (owners, taxes,
regulators, …)
„ Trans. in general ledger (double-entry bookkeeping)
„ Familiar income and balance-sheets
„ Many “accounting fictions” to systematically account
for flows
 Recall: Cost Code
„ Mirrored by cost hierarchy
„ Commonly include standardized and project
components
„ Project id (often has useful info to avoid lookup)
„ Often omitted from internal project references

„ Area-facility code (geographically distributed

projects, or areas of a facility unique to project)
„ Work-type code: WBS May be standard code (e.g.
CSI Masterformat) if uniform across projects
„ Distribution code: Cost type associated with work
„ (e.g. Materials, Equipment, Labor, Subcontract, etc.)
 Illustrative Set of Project Cost Accounts

201 Clearing and preparing site

202 Substructure
202.1 Excavation and shoring
202.2 Piling
202.3 Concrete masonary
202.31 Mixing and placing
202.32 Formwork
202.33 Reinforcing
203 Outside utilities (water. gas, sewer, etc.)
204 Superstructure
204.1 Masonary Construction
204.2 Structural steel
204.3 Wood framing, partitions, etc.
204.4 Exterior finishes (brickwork, terra cotta, cut stone, etc.)
204.5 Roofing, drains, gutters, flashing, etc.
204.6 Interior finish and trim
204.61 Finish flooring, stairs, doors, trim
204.62 Glass, windows, glazing
204.63 Marble, tile, terrazo
204.64 Lathing and plastering
204.65 Soundproofing and insulation
204.66 Finish hardware
204.67 Painting and decorating
204.68 Waterproofing
204.69 Sprinklers and fire protection
204.7 Service work
204.71 Electrical work
204.72 Heating and ventilating
204.73 Plumbing and sewage
204.74 Air conditioning
204.75 Fire alarm, telephone, security, miscellaneus
205 Paving, curbs, walks
206 Installed equipment (elevators, revolving doors, mail chutes, etc.)
207 Fencing
Cost Code Illustration
Example Project Code
 Reporting
„ Often delayed (minimizing delay critical in
effectiveness of feedback systems)
„ Selective reporting widely used: Report only
problematic items
„ Frequent reporting for
„ Important (e.g. high cost)
„ Uncertainty (Unfamiliar procedure, …)

„ Critical

„ Scope
Reporting: Example 1
Reporting: Example 2
Integrated S-Curve
 Exploratory Breakdown
„ Business intelligence software
„ Dynamic breakdown by category
„ Popular for high-level managers
„ Common examples (EXCEL): PivotTable,
PivotChart
 Schedule vs Cost Monitoring
„ Schedule estimates: Aggregate measures suspect
„ Remember that some activities much more
important than others!
„ May want to track particular activities

„ Falling behind on non-critical activities may shift

critical path
„ Cost estimates: All sources of cost can lead to
cost overruns
„ In general, impact of absolute cost overrun from one
activity similar to other activities
 Topics
9 Monitoring and Scheduling: The Big Picture
„ Monitoring
9 Links to previous topics
9 Key components in realizing effective monitoring
9 Measurement: Basics of cost and schedule tracking
9 Components of Measurability
9 Collecting information

„ Performance Metrics
„ Forecasting
„ Quality monitoring
 Performance Metrics

„ Main categories of performance metrics:

„ scope
„ time
„ money
„ quality
„ productivity
„ safety
„ Performance Metrics typically are defined in preparation
for project monitoring before project control.
„ Must facilitate the project control process as well as the
reporting functions of project monitoring
 Main Performance Metrics
Categories Performance Targets Units of
measurements measurement

Scope Amount of work accomplished Amount of work to be M, M2, M3, Tons, $

accomplished

Time Completion dates Milestones, Deadline Day, Week, Month

Money Cost, Cash flow Budget, Profit, Cash flow $, Net Present Value
(NPV)

Quality Quality achieved (Appearance, Target quality level Number of defects,

Durability, Strength, (Appearance, Durability, Value of defects,
Suitability) Strength, Suitability) Number of change
orders

Safety Actual accidents and injuries, Goaled accidents and Person, $, Day, Week,
delays and economic injuries level Month
damages occurred

Productivity Actual productivity Planned productivity Work unit/worker/time

Earned Value Approach - Definitions
Integrating cost, schedule, and work performed
by ascribing monetary values to each.

„ Budgeted Cost of Work Scheduled (BCWS, $): the value of

work scheduled to be accomplished in a given period of time.
„ Actual Cost of Work Performed (ACWP, $): the costs
actually incurred in accomplishing the work performed within
the control time.
„ Budgeted Cost of Work Performed (BCWP, $): the monetary
value of the work actually performed within the control time
(= Earned Value).
„ Actual Time of Work Performed (ATWP, time)
„ Schedule Time of Work Performed (STWP, time)
Earned Value Chart
 Cost Variance
„ Is project spending more or less money than anticipated
for the work that I did?
„ Cost Variance (CV = BCWP - ACWP)
„ + (Underrun); - (Overrun); 0 (On Budget)

„ Cost Index (CI = BCWP/ACWP)

„ > 1 (Underrun); < 1 (Overrun); 1 (On Budget)
 Schedule Variance
„ One metric for judging if project making is “progressing”
faster or slower than expected
„ More precisely: “How does the value of the work I
have actually performed compare to the work I
anticipated performing during this time?”
„ “Progress” here is measured in value of the work ($)
„ Calculated in $ -- but here this is a proxy for value
„ Schedule Variance (SV = BCWP - BCWS)
„ + (Ahead); - (Behind); 0 (On Schedule)
„ Even if just slightly ahead/behind in time, may be large if
working on very expensive component of project
„ Schedule Index (SI = BCWP/BCWS)
„ > 1 (Ahead); < 1 (Behind); 1 (On Schedule)
 Time Variance
„ Is project spending more or less time than anticipated for the
work that I did?
„ Measured in units of time
„ May be very close even if big difference in the resource
spending
„ Time Variance (TV = STWP - ATWP)
„ + (Ahead); - (Delay); 0 (On Schedule)

„ Time Index (TI = STWP / ATWP)

„ > 1 (Ahead); < 1 (Delay); 1 (On Schedule) i
 Resource Flow Variance
„ Compares how much expecting to spend during
this timeframe with what actually spent –
regardless of how much work got done.
„ Warning: Doesn’t indicate bad or good. e.g. = if
„ Going faster but more cheaply than expected
„ Going slower but more expensively than expected
„ Resource Flow Variance (RV = BCWS - ACWP)
„ + (Underrun); - (Overrun); 0 (On Target)

„ Resource Flow Index (RI = BCWS /

ACWP)
„ > 1 (Underrun); < 1 (Overrun); 1 (On Target)
Control Limits
Example: Gantt Chart Schedule
Example: Traditional Reporting
Example: Earned Value Reporting
Example: Activity Analysis
Example: Variances
ACTIVITY BCWP - ACWP = CV

A $ 1,500 - $ 1,500 = $ 0

B $ 3,000 - $ 3,000 = $ 0

E $ 1,628 - $ 2,900 = -$ 1,272

CUMULATIVE VARIANCE = -$ 1,272

ACTIVITY BCWP - BCWS = SV

A $ 1,500 - $ 1,200 = $ 300

B $ 3,000 - $ 3,000 = $ 0

E $ 1,628 - $ 3,256 = -$ 1,628

CUMULATIVE VARIANCE = -$ 1,328

Example: Activity Indexes

BCWP BCWP
Activity = SI = CI
BCWS ACWP

1,500 1,500
A = 1.25 =1
1,200 1,500

3,000 3,000
B =1 =1
3,000 3,000

1,628 1,628
E = 0.5 = 0.56
3,256 2,900
 Example: Project Indexes
The Aggregate Cost Index is:

1,500 + 3,000 + 1,628

SI = = 0.82
1,200 + 3,000 + 3,256

1,500 + 3,000 + 1,628

CI = = 0.83
1,500 + 3,000 + 2,900
 Example: Earned Value Reporting

Values (in Dollars) of BCWS, BCWP, and ACWP for Weeks 1-4
Week 1 Week 2 Week 3 Week 4
Activity BCWS BCWP ACWP BCWS BCWP ACWP BCWS BCWP ACWP BCWS BCWP ACWP
A 300 500 500 300 500 500 300 300 300 300 200 200
B 1,000 1,000 1,000 1,000 1,000 1,000 1,000 500 500 0 500 500
E 814 300 814 814 400 686 814 500 1,000 814 428 400
2,114 1,800 2,314 2,114 1,900 2,186 2,114 1,300 1,800 1,114 1,128 1,100
Example: Earned Value Analysis
Example: Schedule and Cost Index
Example: Integrating CI and SI